At a glance:

  • Pay your premiums regularly to avoid gaps in coverage.
  • Update your personal information, especially if there are changes in your employment status or health issues.
  • Seek professional advice to ensure that you have the right level of coverage and understand the proper claim procedures.



What is coverage gap?


A coverage gap in income protection insurance is a situation where the policyholder’s insurance coverage does not fully protect them in the event of a claim. Income protection insurance is designed to provide a regular income stream to individuals who are unable to work due to illness or injury. It typically covers a portion of the policyholder’s income, usually up to 75% for a specified period.


A coverage gap in income protection insurance can occur due to various factors, such as inadequate insurance coverage, changes in the policyholder’s circumstances that were not accounted for in the policy, or lapses in payment or policy expiration. These gaps can leave individuals vulnerable to financial hardships in the event of an unexpected illness or injury.



How can you avoid coverage gaps?


Income protection insurance is a valuable financial tool that can help you maintain your lifestyle and financial security if you’re unable to work due to illness or injury. To ensure that you’re making the most of your income protection insurance and avoiding coverage gaps, here are some tips to keep in mind:


Determine how much coverage you need


Before purchasing income protection insurance, it’s important to determine how much coverage you need. This will depend on factors such as your income, monthly expenses, and the amount of savings you have. It’s essential to purchase enough coverage to ensure that you can cover your expenses and maintain your lifestyle if you’re unable to work.


Income protection coverage

In Australia, income protection insurance typically covers up to 75% of your pre-tax income for a specified period. sually up to two years or until you’re able to return to work.


The exact amount and length of coverage will depend on your specific policy and the insurer you choose. Some income protection insurance policies may offer additional benefits, such as rehabilitation services, a lump sum payment for a terminal illness diagnosis, or a benefit period that extends beyond two years.


Types of Coverage


There are two main types of income protection insurance coverage in Australia: agreed value and indemnity.


Agreed value coverage is based on your income at the time you apply for the policy, while indemnity coverage is based on your income at the time you make a claim. Agreed value coverage tends to be more expensive, but it can provide more certainty about the amount of coverage you’ll receive in the event of a claim.


When considering income protection insurance coverage, it’s important to understand the terms of the policy, including any exclusions or limitations, waiting periods, and benefit periods.


Understand your policy


Take the time to carefully read and understand your income protection insurance policy. This will help you to understand what is covered, the waiting period before benefits kick in, and any exclusions or limitations that may apply. Understanding your policy can help you to avoid any surprises or coverage gaps down the line.


Here are some key factors to consider when understanding your income protection policy:


Waiting period: This is the period you must wait before you start receiving benefits. Waiting periods usually range from 14 days to 2 years.


Benefit period: This is the period for which you will receive benefits. Benefit periods usually range from 2 years to age 70.


Benefit amount: This is the amount you will receive as a benefit. It is typically a percentage of your pre-disability income, up to a maximum amount.


Premiums: This is the amount you will need to pay to keep your policy in force. Premiums can vary depending on factors such as your age, occupation, and health.


Exclusions: These are medical conditions or circumstances that are not covered by the policy. It’s important to understand what is not covered to avoid surprises when making a claim.


Renewability: Some policies may not be renewable, while others may have conditions for renewal. Make sure you understand the renewal terms of your policy.


It’s important to carefully review your policy document and consult with your insurance provider if you have any questions or concerns about your coverage.


Pay your premiums regularly


To avoid coverage gaps, it’s important to pay your premiums regularly and on time. Make sure you’re aware of the payment schedule for your policy and set up automatic payments if possible to ensure that you don’t miss any payments.


Income protection insurance premiums


Income protection insurance premiums can vary based on several factors, such as age, occupation, health, coverage amount, and waiting period. According to Finder, the average cost of income protection insurance in Australia is around 1% to 3% of your annual income. However, the actual cost may vary depending on your individual circumstances and the policy you choose.


Some insurers offer a quick quote tool on their websites, which allows you to get an estimate of the cost of income protection insurance based on your inputs. It is important to note that paying lower premiums may result in lower coverage amounts or longer waiting periods, which could affect the overall effectiveness of your policy.


Before purchasing income protection insurance, it is important to consider your budget, coverage needs, and the terms and conditions of the policy carefully. Seeking professional advice from a licensed financial advisor or insurance broker can also help you find the most suitable policy for your individual circumstances.


Types of premium payment options:

Premium payment options for income protection insurance in Australia vary depending on the insurer and the policy. Some common payment options include:


  • Annual payment: This is the traditional payment option, where the policyholder pays the full premium amount for the year upfront.
  • Monthly payment: Many insurers allow policyholders to pay their premiums on a monthly basis, which can be more manageable for some people’s budget.
  • Fortnightly payment: Some insurers may also offer the option to pay premiums on a fortnightly basis, which can help to spread the cost out even further.
  • Quarterly payment: Another payment option is to pay premiums every three months.
  • Half-yearly payment: Some insurers may offer the option to pay premiums every six months.


Update your personal information:

It’s essential to keep your personal information up-to-date with your insurer. This includes any changes in your employment status, income, or address. Failing to update your personal information can result in coverage gaps, such as not being covered for your current employment status.


Updating your personal information is an essential step to ensure that your income protection insurance policy remains up-to-date and accurate. Some useful resources to help you update your personal information:


Aspect Underwriting- We provide an online platform to obtain an income protection insurance quote, and it also allows you to update your personal information. You can create an account and log in to your dashboard to make changes to your policy details, such as your address, occupation, or contact information.


Personal information

To create income protection insurance, you will generally need to provide personal information such as your name, age, occupation, income, and medical history. This information is used by the insurer to assess your level of risk and determine your premiums. You may also be required to disclose any pre-existing medical conditions or health issues, as these may affect the coverage you receive.


In some cases, you may need to undergo a medical exam or provide medical records as part of the application process. It is important to be honest and accurate in providing this information, as failure to disclose relevant details can result in your policy being cancelled or claims being denied.


Being honest about health issues:

When applying for income protection insurance, it’s important to be truthful and upfront about your medical history. Failing to disclose any pre-existing medical conditions or health issues can result in coverage gaps or even the policy being voided. This can leave you without coverage when you need it most.


Adjust coverage amounts:

As your financial situation changes over time, it may be necessary to adjust your coverage amounts. This can help ensure that your policy provides adequate coverage to meet your needs.


Adjusting coverage amounts for income protection insurance typically involves contacting your insurance provider or broker and requesting a change in the amount of coverage you have. The process may vary depending on the provider, but generally, you may need to fill out a form or provide some personal information to make the adjustment.


Here are the general steps to adjust your coverage amounts for income protection insurance:


  1. Contact your insurance provider or broker: You can typically find their contact information on your insurance policy or the provider’s website.
  2. Discuss your coverage needs: Talk to the provider about why you want to adjust your coverage amounts and what you need from your income protection insurance.
  3. Fill out a form: The provider may require you to fill out a form with personal and financial information. This may include your name, date of birth, occupation, income, and other relevant details.
  4. Wait for approval: The provider may review your request and approve or deny it. If approved, they will update your policy and provide you with a new premium amount.


It’s important to review your coverage needs regularly and adjust your coverage amounts accordingly. This can ensure that you have the right level of protection and help you avoid coverage gaps.


Claim forms are important while filing for income protection claims


Follow proper claim procedures:

In the event of a claim, it’s important to follow the proper claim procedures outlined in your policy. This can help ensure that your claim is processed quickly and efficiently, minimising any potential coverage gaps.


A proper claims procedure for income protection insurance includes the following steps:


  1. Contact your insurance provider: As soon as you are unable to work due to illness or injury, you should notify your insurance provider. They will guide you through the claims process and provide you with the necessary forms.
  2. Complete the claim form: You will need to complete a claim form, which will ask for information such as your personal details, your employer details, your medical history, and the nature of your illness or injury.
  3. Provide supporting documents: You will need to provide supporting documents such as medical reports, hospital records, and payslips to substantiate your claim.
  4. Wait for the insurer to assess your claim: Your insurer will assess your claim and may request further information or documentation if needed.
  5. Receive a decision: Once the insurer has all the necessary information, they will make a decision on your claim. If your claim is approved, you will receive a benefit payment. If your claim is denied, you will receive a written explanation of the reasons for the denial.


It is important to follow the proper claims procedures to ensure a timely and smooth claims process.


Seek professional advice:

If you’re unsure about the coverage you need or have any questions about your income protection insurance policy, seek professional advice from a financial advisor or insurance expert. They can provide you with personalised advice based on your specific needs and circumstances, as well as help you understand the terms and conditions of your policy.


They can also assist you with making claims and ensuring that you receive the maximum benefit from your policy. It is important to choose a reputable and experienced professional who is licensed and regulated by relevant authorities.



It is clear that income protection insurance is an important type of insurance that provides financial support to individuals in the event of an illness or injury that prevents them from working. The coverage provided can vary depending on the policy, but it typically pays a percentage of the policyholder’s income for a specified period of time.


To ensure that coverage gaps are avoided, it is essential to pay premiums regularly, update personal information such as changes in employment status or health issues, adjust coverage amounts as necessary, and follow proper claim procedures. Seeking professional advice is also recommended to ensure that you fully understand your policy and its benefits.


Premium costs and payment options vary depending on the policy and the insurer. It is important to research and compare policies to find one that meets your needs and budget. Finally, in the event that you need to file a claim, it is important to understand the proper claim procedures to avoid delays or denials of your claim.


Mike Wallis

Mike has over 25 years experience, having spent his first seven years working as a Broker at Jardine Lloyd Thomson in Melbourne and in 2002 was transferred to JLT’s Accident and Health Department in London. For four years (2002 – 2005) Mike was a specialist A&H Lloyd’s Broker and during this time developed excellent relationships with the Lloyd’s A&H underwriting fraternity. In 2006 he returned to Australia in a senior broking position with overall responsibility for Placement Strategy, including the implementation of underwriting facilities and the various authorities granted by Lloyd’s. Mike was the underwriter at two specialist Underwriting Agencies prior to founding Aspect Underwriting in 2016.